How surprised are any of us that the two US satellite radio companies, trying to get permission from US regulators to go ahead and merge, are all in favor of the new FCC ruling over HD Radio.
XM and Sirius jointly issued their own comments to the FCC this week saying, ‘The FCC decision underlines that HD radio on the AM/FM bands provide a real alternative to satellite, and that the current audio entertainment market is broad, robust and competitive.
The new ruling by the FCC is a formal adoption of previous orders that temporarily accepted the use of what it refers to as ‘in band on channel’ (IBOC) technology, but which has since been widely re-christened as HD Radio.
The technology allows an analog audio signal and a digital signal to sit within the same spectrum and was initially proposed by Ibiquity Digital which holds the intellectual property for the system.
In October 2002 the FCC selected HD Radio as the US technology for digital audio broadcasting which looked like a decision to protect US suppliers so that the US would not be swamped by the Digital Audio Broadcasting technology that now dominates global digital radio and which came out of a European Commission research project.
Already there are over 1200 stations which now use or intend to use this HD Radio says the FCC, while the actual figures is considered to be at least double this. So perhaps by making the ruling final the FCC can encourage US manufacturers to start making decent radios that actually offer improved audio quality from these services, something that really hasn’t been achieved to date in the US.
The FCC ruling also stated that it would not introduce a mandatory timescale for all US radio to convert to HD Radio, that it would extend the technology to FM radio as well as AM, but added that each radio station must ensure that the digital signal is at least as good as the analog signal. That last requirement is pretty pointless if radio manufacturers don’t actually make devices that have the same quality.
The truth is that with around 13,000 radio stations in the US, the FCC has convinced less than 10% to offer HD Radio. It now needs to radically accelerate this in order to engage the attention of device manufacturers.
The FCC ruling also allows for radio stations to broker any unused datacasting bandwidth, another benefit of the technology
The endorsement from the satellite radio providers made the point that given that they only have 14 million subscribers between them and that terrestrial radio has around 230 million weekly listeners, this demonstrates that the current media marketplace is robustly competitive.
This is at odds however with the fact that HD radios have sold in the ‘low hundreds of thousands,’ and have only just started being bundled by car manufacturers.
Also if you divide those number of listeners evenly between the 13,000 radio stations you end up with an average of 18,000 listeners per station and even if you take any block of 120 stations like Sirius or XM, that still only comes to two million listeners, compared to 14 million. Any way you cut it the satellite radio stations are dominant and thriving and eating the best markets for US radio listeners. But they are also still losing money.
We have always felt that the US authorities are duty bound to let the merger go ahead due to the fact that customer acquisition among these two companies can be shown to be slowing down and without a merger the two services have no real future.
That doesn’t meant that it’s fair for the cosy business of US terrestrial radio, but then again US radio is living on borrowed time once internet business models can accommodate localized advertising models.